Phase one deal still in sight despite Hong Kong bill - Danske Bank

"Markets got jittery this week as Trump put pen to paper and signed the Hong Kong bill, which works to support protesters in Hong Kong," note Danske Bank analysts.

Key quotes

"As expected, China reacted strongly to the decisions and summoned the US ambassador in China, calling for the US to 'correct its mistake '. However, there was no sign that the dispute would affect the negotiations to reach a phase one deal. On Wednesday, US President Donald Trump said that 'We're in the final throes of a very important deal. It's going very well but at the same time we want to see it go well in Hong Kong '."

"We expect a phase one deal to be in place ahead of the unofficial deadline of 15 December , the date US tariffs on another USD160bn of goods from China will go into force unless Trump cancels them. However, this last tranche of tariffs will hurt the US economy more than previous tariffs, which Trump would most likely want to avoid. In addition, with falling approval among farmers, Trump is eager to get China to buy soybeans, pork and other farm products again."

"The farmers have generally supported Trump in 'taking on China' but have also been clear that it had to end with a deal that gave them their market back and preferably with even higher Chinese purchases than before the trade war. The latter would probably require a phase two deal next year, though."